Deciding whether to outsource.[check] This checklist is for those who must address the decision of whether to outsource or not, and if so, what and how to outsource. Encompassed are the stages in the outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. process leading up to drawing up and testing a contract. Often seen as a threat by employees and an opportunity by organisations, outsourcing is now standard practice in many organisations. In addition to the driver of cost-savings, there are many other elements that lead to a consideration of outsourcing, in particular the need for flexibility as demand for products or services rises and falls Rise and Fall redirects here. For the Belgian hardcore band, click here. Rises and falls is a category of the ballroom dance technique that refers to rises and falls of the body of a dancer achieved through actions of knees and feet (ankles). , and ways of delivering them improve. On the surface the benefits of outsourcing seem not only straightforward but also considerable. Experience shows, however, that there are many pitfalls, dangers and costs. Definition Increasingly, outsourcing is understood to mean the retention of responsibility for services by the organisation but devolution devolution n. the transfer of rights, powers, or an office (public or private) from one person or government to another. (See: devolve) DEVOLUTION, eccl. law. of the day-to-day delivery of those services to an external organisation, usually under a contract with agreed performance standards, costs and conditions. In this checklist the organisation considering outsourcing some or part of its functions will be called the Organisation; the external organisation to take them on will be called the Agency. Advantages of outsourcing The decision to outsource takes place for reasons of: * cost and efficiency savings including staffing flexibility * greater financial flexibility through reduced overheads * operational flexibility and control through contractual relationships * a wish or a need to focus on core activities * access to better management skills on non core-activities Disadvantages of outsourcing * Changing support functions may bring about reduced robustness. * Information flows with the Agency will need careful co-ordination. * Reduced learning capacity through a depleted de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d skill-base. * Declining morale and motivation as jobs appear to "go". * Reduced ability to integrate processes. * Possible lack of control over activities outsourced. * Increased insecurity Insecurity Inseparability (See FRIENDSHIP.) Insolence (See ARROGANCE.) Hamlet introspective, vacillating Prince of Denmark. [Br. Lit.: Hamlet] Linus cartoon character who is lost without his security blanket. , whether staff remain in the Organisation, or are taken on by the Agency. Action Checklist 1. Establish the outsourcing project team Treat the outsourcing proposal as a project. Apply the principles of project management, especially selecting a project leader and team, establishing terms of reference Terms of reference allude to a mutual agreement under which a command, element, or unit exercises authority or undertakes specific missions or tasks relative to another command, element, or unit. Also called TORs. , a method of working and an action plan. 2. Analyse your current position Ideally, you should have carried out a radical review of the organisation's processes--you don't want to outsource an activity that might be better integrated with another you regard as "core". Ensure you have assessed: * the advantage to be achieved by concentration on core services The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. * minimum involvement required in things that don't affect the customer * control required of non-diminishing, non-productive overheads * functions which are more viable through an external agency * a clear vision of where the business is to be. 3. Pay attention to people As soon as it becomes known that outsourcing is under consideration, people will suffer from anxiety and uncertainty. At best their working life will transfer from one employer to another, at worst their job could be lost. Keep people at the forefront of your thinking. 4. Benchmark Someone, somewhere is probably doing the same thing in a better way, or in the same way at lower cost. Identify appropriate organisations to benchmark against and establish which activities they are outsourcing. 5. Come to a decision Decide which are your core areas--Tom Peters said: "...do what you do best and outsource the rest". The principal questions are: * what is core to the business and to the future of the business? * what can bring competitive advantage? Then, decide whether outsourcing should become policy for organisation-wide application to non-core areas or if it is to be used as the need arises. 6. Decide what to outsource Logically, what to outsource follows from the decision process. If you focus on the core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
Areas which have traditionally been subject to outsourcing include legal services legal services n. the work performed by a lawyer for a client. , transport, catering, printing, advertising, accounting, and, especially, auditing and security. More recently these have been joined by data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a , IT services, information processing information processing: see data processing. information processing Acquisition, recording, organization, retrieval, display, and dissemination of information. Today the term usually refers to computer-based operations. , public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most , buildings management and training. Some large organisations have outsourced the entire human resource management function, including recruitment, assessment and selection of new staff, together with their continuing development. Staff are sometimes transferred with the function to the Agency. Obviously, this is an area that requires great consideration and sensitivity. There are legal considerations under the Transfer of Undertaking (Protection of Employment) Regulations (TUPE TUPE Transfer of Undertakings (employee rights) TUPE Transfer of Undertakings Protection of Employment (UK) TUPE Tupelo National Battlefield (US National Park Service) ). 7. Tender the package The tender is both an objective document detailing the services, activities and targets required, and a selling document which serves to attract potential suppliers. Outsourcing is not just a matter of getting rid of problem areas. Once an attractive package has been defined, send an outline specification and request for information to those Agencies likely to be interested. The outline specification contains the broad intention of the outsourcing proposal and the time-scales the Organisation has in mind. The request for information is a questionnaire-type eligibility test intended to establish the level of the Agency's competence and interest. The second stage is the invitation to tender--a precise document which spells out exactly what Agencies are required to bid for. 8. Choose a partner The tender process should be used for the evaluation of facts, but choosing an outsourcing partner is much more than choosing a new supplier, because the process involves a customised service, agreement on service levels and a contract. At this stage the Organisation will be looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. an Agency with which it can share objectives and values, have regular senior management meetings, and disclose otherwise confidential information Noun 1. confidential information - an indication of potential opportunity; "he got a tip on the stock market"; "a good lead for a job" steer, tip, wind, hint, lead . Harmony of management styles is a key requisite for success. The Organisation will also look for: * a proven track record, a flexible approach and financial viability * experience in handling the sensitive issue of staff absorption * evidence of quality management * how important in turnover the contract is for the Agency. 9. Meet the staff It is essential that the Agency meets its prospective new staff before any contracts are signed. Allowing concerns to be aired and questions to be asked may help to reduce feelings of being "dumped" or cast aside. On the other hand, glaring glar·ing adj. 1. Shining intensely and blindingly: the glaring noonday sun. 2. Tastelessly showy or bright; garish. 3. conflicts in style and personalities may emerge which can have an important impact on the contractual stage. Many other issues involving terms and conditions of employment conditions of employment that part of an employment that sets out the duties, responsibilities, hours of work, salary, leave and other privileges to be enjoyed by persons employed, for example a veterinary nurse, in private practice. will need addressing, including those of appropriate compensation if Agency employment is not available or not required. 10. Draw up the contract If it is to be the project team that draws up the contract it will need to have a strong legal input, especially on TUPE--the Transfer of Undertakings (Protection of Employment) Regulations 1981as amended.. The contract should cover: * measurable service levels that the Agency will provide, and checks and controls that these are met--perhaps via a liaison manager--and clauses including remedies or financial compensation if they are not * demarcation of service responsibilities and boundaries so that both Organisation and Agency are clear on who is doing what * who owns what in terms of equipment and hardware * the fate of the staff to be transferred and details of their terms and conditions of employment--in the short, medium and long term, and including pensions provisions * flexibility and allowance for change, for example if business volumes double or halves * a contract term, with a review date and provision for the outsourced function to revert re·vert v. 1. To return to a former condition, practice, subject, or belief. 2. To undergo genetic reversion. to the Organisation * a pilot period before the contract becomes fully operational. 11. Test the contract Ensure that the contract will stand up to the rigours and complexities of the operation in action. A period of testing and trial is ideal for making adjustments before the contract becomes final and to examine the possibility and consequences of the partnership breaking down. Dos and don'ts of outsourcing Do * Outsource the "doing" of an activity, not the responsibility for it. * Understand the scope of the services to be outsourced. * Have a clear vision of what outsourcing should achieve Don't * Let the goal of cost savings dominate everything else. * Think that outsourcing is the answer to all problems. * Outsource core strategic, customer or financial management Useful reading Books What's this India business: offshoring
Offshoring describes the relocation of business processes from one country to another. , outsourcingand the global services revolution, Paul Davis Paul Davis may refer to:
Outsourcing HR, Work Foundation (Managing Best Practice 107) London: Work Foundation, 2003 Strategic outsourcing: exploiting the skills of third parties, Ian Benn and Jill Pearcey Management Consultancies Association London: Hodder & Stoughton, 2002 The challenge of outsourcing human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , Sally Vanson Oxford: Chandos Publishing, 2001 Journal Articles Making offshoring happen, Rob Yeung Rob Yeung is a British business psychologist and management author. He presented the BBC television series Who Would Hire You? in which real life candidates went through the recruitment process. Accountancy, vol 135 no 1340, April 2005, pp55-56 Gone but not forgotten, Lesley Meall Accountancy, vol 135 no 1340, April 2005, pp59-60 Strategic sourcing: from periphery periphery /pe·riph·ery/ (pe-rif´er-e) an outward surface or structure; the portion of a system outside the central region.periph´eral pe·riph·er·y n. 1. to core, Mark Gottfredson, Rudy Puryear and Stephen Phillips
Stephen Phillips (28 July 1864 – December 9, 1915) was an English poet and dramatist, who enjoyed considerable popularity in his lifetime. Harvard Business Review Harvard Business Review is a general management magazine published since 1922 by Harvard Business School Publishing, owned by the Harvard Business School. A monthly research-based magazine written for business practitioners, it claims a high ranking business readership and , vol 83 no 2, Feb 2005, pp132-139 Learning outsourcing: a reality check, Nancy DeViney and Brenda Sugrue Training & Development, vol 58 no 12, Dec 2004, pp40-45 Thought starters * Have you defined the core areas in which you need to excel? * Do routine and support functions consume an ever larger slice of overheads? * Can you identify benchmark organisations to track their progress? * How do you address the concerns of staff? |
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